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You're Not the Only One Buying Here

Insiders are scooping up shares of these companies by the handful.

Famed money manager Peter Lynch gave us the inside scoop on how to look at insider transactions. Executives can sell their stock for any reason, he said, but they buy for only one: They think the price is going up!

Today, I've highlighted a handful of insiders who have made big purchases of their own company's stock in the past week. These aren't executives getting big chunks of shares from option grants. Rather, they're insiders putting their own money on the line and buying shares at market prices. I then paired that information with insights from the members of Motley Fool CAPS to see whether they think the stock has the same prospects the insiders do.

Although following the lead of insiders can be profitable, we still recommend you do further due diligence to determine whether these stocks ought to be sold from your own portfolio -- or would make a good addition! So this isn't a list of stocks to sell or buy, but just the inside track on companies you might want to check out further.

A wide gulfThe bullish case for ATP Oil & Gas seems pretty convincing: More than two thirds of its oil and gas reserves lie in the Gulf of Mexico, it got its drilling permits (finally!) back in March, and a discounted cash flow analysis makes it look cheap, particularly in comparison with fellow drillers such as Noble Energy(NYSE: NBL) and Chevron(NYSE: CVX).

The problem is that ATP is also a heavily debt-addled, cash-strapped driller that's continuously going to the markets to raise cash, all the while diluting current shareholders. Most recently it closed on a $172 million convertible preferred stock offering.

We're also heading into hurricane season, and the National Weather Service is predicting above-normal activity, with as many as six to 10 named hurricanes and three to six major ones of a Category 3 or better. That makes for dicey drilling in the Gulf.

Yet if ATP can make a go of it, then service providers such as Helix Energy Solutions should be able to as well. BHP Billiton(NYSE: BHP) received the second permit issued in the Gulf after ATP, and it has deployed the equipment made by Helix to assist in the event of another blowout.

Forcing more production from the Gulf would probably do more to ease our oil dependence from foreign sources and lower prices than the stopgap measure of releasing oil from the strategic reserves. Pressure remains to speed up the permitting process, and when realized, the Gulf will become a hub of activity again.

Investors remain convinced that the ATP bulls will prevail. CAPS All-Star tad40 is willing to follow the CEO into the breach, while 10skimo suggests that with drilling permits in hand, the resulting production will cause a short squeeze: "This stock was excessively shorted due to the [Gulf of Mexico] drilling moratorium. Now that they have drilling permits approved, they will find enough cash to fund a successful drilling program, forcing shorts to cover and driving up stock price on fundamentals."

With 45% of the float being sold short, that's certainly a possibility. More generally, the CAPS community stands solidly behind the driller, with 97% of those rating it believing it will beat the market indexes. But you can drill deep on others' views on the ATP Oil & Gas CAPS page.

A transforming eventWaste specialist Valhi(NYSE: VHI) was featured here last time out, as its chairman was seen scooping up millions of dollars' worth of stock. Well, he's still buying Valhi shares, but he's also buying Titanium Metals stock, in which Valhi has an ownership interest. In fact, he's purchased more than $41 million worth of Titanium Metals stock in June. Obviously, he's feeling even more comfortable in the company's ability to grow than he was in the waste specialist.

CAPS member HikuU agrees, believing the industry is turning itself around, and 97% of the more than 2,600 members rating Titanium Metals find that they'd be hard-pressed to disagree. Commodities overall pulled back sharply last month, and there was broad agreement that it represented a buying opportunity, which Simmons apparently agreed with.

On the inside trackFollowing the insiders can be a path to profits, but it pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page. Sign up today for the completely free service, and tell us whether it's worth trading on this inside information.

Author

Rich has been a Fool since 1998 and writing for the site since 2004. After 20 years of patrolling the mean streets of suburbia, he hung up his badge and gun to take up a pen full time.

Having made the streets safe for Truth, Justice and Krispy Kreme donuts, he now patrols the markets looking for companies he can lock up as long-term holdings in a portfolio. So follow me on Facebook and Twitter for the most important industry news in retail and consumer products and other great stories.